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Southwest November Operating Revenue Down 63%; Sees Softness In Leisure Passenger Demand

Southwest Airlines Inc. (LUV) said Wednesday it continues to experience significant year-over-year negative impacts to passenger demand and bookings due to the COVID-19 pandemic.

The company noted in a regulatory filing that after several months of modest improvements in close-in leisure passenger demand, it saw a deceleration in improving revenue trends in November 2020 due to a spike in COVID-19 cases, renewed quarantine requirements, travel restrictions, and related government orders.

In addition, Southwest experienced an increase in trip cancellations in the weeks prior to the Thanksgiving holiday travel period. However, the company noted that leisure passenger demand was more resilient for the Thanksgiving holiday travel period compared with non-holiday weeks in November 2020.

For November 2020, Southwest's operating revenues declined about 63 percent year-over year, compared to its estimate of down 60 percent to 65 percent. Load factor for the November was about 48 percent, compared to its estimate of 50 percent to 55 percent earlier. Available Seat Miles or ASMs were down 35 percent.

The airline said it continues to experience softness in leisure passenger demand and bookings for December 2020, as well as elevated levels of trip cancellations for December travel, amid the continued surge in COVID-19 cases and depressed revenue environment.

For December, Southwest now forecasts operating revenue to decrease 65 percent to 75 percent, compared to the prior outlook for down 60 percent to 65 percent. Load factor for the month is now projected to 60 percent to 65 percent, versus its earlier forecast in a range of 60 percent to 70 percent. ASMs are projected to be down 40 percent to 45 percent.

Southwest currently estimates the softness in leisure passenger demand and bookings to continue into January 2021. The company forecast operating revenue for January 2021 to be down 65 percent to 75 percent, Load factor of 45 percent to 55 percent, and ASMs to be down 40 percent to 45 percent.

Thus far, leisure bookings for holiday travel in late December 2020 and early January 2021 are outpacing leisure passenger demand and bookings in non-holiday time periods for both months, Southwest said. The company remains cautious due to the uncertainty of near-term revenue trends.

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